Those who play DeFi should deeply understand: many protocols now have a 'split personality' problem. On one hand, the ecosystem is thriving, with increasing trading volume and user numbers; on the other hand, the price of the protocol's core token may be barely alive, or even continuously falling. Why? Because the utility value of the network and the holding value of the token are fundamentally two parallel lines that are not aligned.
Users come in to trade and mine, make money and leave; validators or liquidity providers also earn short-term incentives. However, the governance token, which should represent the core value of the protocol, often becomes a purely speculative tool or is diluted by endless inflation. The result is: the more lively the ecosystem, the greater the selling pressure on the token may be — this economic model is fundamentally backwards.
Recently, there is a public chain called Injective (INJ) that proposed a very interesting solution. It is not satisfied with just being a 'high-performance chain,' but wants to directly create a 'self-enhancing financial engine.' Simply put: make every on-chain activity become fuel that 'charges' the value of INJ tokens.
Core hard move: turning 'transaction fees' into 'value recovery bombs.'
How to achieve this? Injective has devised a very clever 'weekly auction destruction' mechanism. This is not a simple and crude 'direct destruction of transaction fees.'
Tax only on 'staple goods': all network fees on Injective must be paid in INJ. This tightly binds fees to the native token.
Auction destruction allows the market to set prices: these collected INJ transaction fees will not be directly destroyed or fully distributed to nodes. Instead, they are packaged into an auction pool weekly. At this point, a role called 'relayer' enters, and they must bid with INJ to compete for the right to 'process this batch of transactions and earn transaction fees.'
Real money buyout, permanent destruction: all INJ bid by the winning bidder will be used by the protocol to repurchase an equivalent amount of INJ from the open market and then directly burn it, never to return.
Where is the brilliance of this design?
Transforming costs into investments: relayers bid to earn (transaction fees), but their bids (INJ) become the force that drives up coin prices (buyback destruction). The cost of network security operations directly translates into the value accumulation of the protocol.
Automatically adjusting deflation: the busier the network, the more transaction fees, the fatter the auction pool, the fiercer the competition among relayers, the stronger the buyback destruction. The intensity of deflation is determined by real-time voting with real money in the market, not by rigid rules. In one month alone, over 30 million USD worth of INJ was burned, with immediate results.
This creates a flywheel effect: more users → more fees → more aggressive destruction → INJ becomes scarcer, value rises → attracts more holders and builders → network is more secure, more users... a perfect closed loop.
Double insurance: staking is not just for earning interest, but also for 'governance armament.'
Just having destruction is not enough; Injective has added a powerful component to the flywheel: staking.
The purpose of staking INJ here is very clear:
Ensure security: this is the fundamental duty of a POS chain.
Gain governance rights: this is the key. Currently, over 56 million INJ are locked in staking, with APY exceeding 12%. This effectively 'freezes' a large portion of the circulating supply, tying it to the long-term interests of the network.
Stakers are not passive interest-eaters; they are the 'board of directors' of the protocol. How to adjust the fee structure? Should we introduce new assets like Bitcoin ETF tokens? Who decides on major upgrades? They all have to vote. Governance has become the hardcore utility of INJ here. The more you stake, the louder your voice, guiding the protocol in a direction that increases the value of your assets.
Thus, the staking layer locks the supply, reduces selling pressure, while governance actions expand the practical use cases of the tokens, which in turn promotes more on-chain activities, generating more fees that feed that destruction engine.
Is the engine powerful enough? Look at the technical chassis.
No matter how fancy the economic model is, if the chain itself is useless, it's all in vain. Injective's positioning is very clear: a high-performance L1 designed specifically for finance.
Fast and cheap: sub-second finality, having processed billions of transactions, this is a hard threshold for derivatives and high-frequency trading.
Embrace the Ethereum ecosystem: they have integrated EVM, allowing Solidity developers to migrate seamlessly. This move immediately attracted over 30 projects, as everyone has suffered from the high costs and long congestion of the Ethereum mainnet.
Multi-virtual machine support: in the future, it will not only support EVM but also CosmWasm, giving developers maximum flexibility.
Technology serves business. These performances have directly spawned explosive applications like Helix (decentralized derivatives exchange) and Neptune Finance (lending protocol). The transaction fees generated by each transaction and each loan on these applications ultimately flow into the weekly auction destruction pool. The prosperity of applications directly equates to the accelerated deflation of INJ.
Future big test: when institutional funds flood in, where are the pressure points?
This set of combinations from Injective - deflationary destruction engine + governance staking + professional-grade financial chain - is indeed logically self-consistent. But the real test it faces may come from the next wave: institutional-level DeFi activities.
If a large amount of institutional funds really enter the market, I think the biggest pressure may not be on the technical level (its performance reserves are sufficient), but on the 'governance layer'.
Decision efficiency vs. decentralization: institutions need clear, stable, and predictable rules. Highly decentralized community governance often leads to more debates and slower decisions. When rapid responses to market changes (e.g., adjusting key parameters) are needed, can the staking governance mechanism of INJ maintain efficiency without falling into a deadlock?
The complexity of interest games: after institutional giants become the main stakers, are their interests completely aligned with those of the early community and ordinary users? Will governance voting turn into a pure game of big capital, thereby harming the openness and original intention of the protocol?
Extreme stress testing of the economic model: in an extreme bull market, could the devastating deflation caused by massive transaction fees lead to excessive tightening of INJ liquidity, which would be detrimental to ecological application development? In a bear market, when transaction fees plummet, can high APY from staking be maintained when deflation is weak? How to avoid a downward spiral?
Conclusion
Injective's exploration essentially answers the most core question of DeFi: how to ensure that the value of a protocol is not hijacked by Ponzi incentives and speculators, but firmly anchored in its real utility created?
The answer it gives is: design the token as the 'equity' of the protocol, turning on-chain activities into a 'dividend buyback plan' for this equity.
Is this path viable? It remains to be seen. But it undoubtedly provides the industry with a highly enlightening model: the competition among public chains has long surpassed the simple TPS battle. In the future, those that succeed will surely be the ones that can perfectly integrate technical performance, economic models, and governance philosophy to form a solid, self-consistent, and evolutionarily capable organism.
Injective has set up the chessboard and made a bold move. The next move will depend on how the market and players respond.
